FIIs may return to Indian equities as global headwinds ease and domestic fundamentals remain strong: Report

Foreign portfolio investors (FPIs) have injected a net USD 8.2 billion into Indian equities since mid-October 2026, reversing a two-year trend of significant selling, according to a report by Jefferies, a global brokerage. In its India Equity Strategy report titled "Where Could a Revival in FPI Flows Go?," Jefferies noted "After persistent selling, FPI flows have turned positive recently, with US$8.2bn net inflows since mid-Oct."

The majority of the inflows, USD 5.8 billion, arrived in just six trading sessions during November, as per data cited in the report up to November 6. The turnaround follows extensive withdrawals by FPIs, with USD 61 billion pulled out of Indian equities between September 2024 and October 2026. While the first ten months of 2026 saw outflows of USD 31 billion, FPI ownership in BSE500 stocks has dropped to the lowest level in the past decade at 17.3%, down from 19.6% as of September 2024, according to Jefferies.

Analysis of 70 major active emerging-market funds managing a combined USD 370 billion revealed that 61% of these funds were underweight on India as of September 2026, meaning their exposure was below India's weight in the benchmark index. Jefferies points out that overall FPI positioning remains light, with India's average overweight position in these funds at just 0.1 percentage points, compared to the 10-year average of 2.2 percentage points, suggesting potential for increased foreign investments.

Factors that could support continued inflows include a possible shift in global investments away from artificial intelligence-related stocks, declining crude oil prices, potential equity tax relief, and robust domestic economic indicators such as healthy festive-season automobile sales, strong power demand, and credit growth. Jefferies also highlighted that Nifty 100 is trading at around 18.6 times its estimated earnings for the next 12 months, about 5% below its 10-year average, suggesting large-cap companies could benefit more directly from sustained foreign investment flows.